Hoping to jumpstart sales, LivePerson, a New York-based provider of hosted Web chat services, acquired the assets of Silicon Valley's NewChannel, a rival ASP serving up related customer-acquisition technology, in a cash transaction. LivePerson claims the purchase will increase monthly revenue by 12 percent, with minimal incremental costs.
That's because the key asset, in this case, is NewChannel's customer list, which includes Global 2000 companies in financial services, telecommunications and high-tech. The strategy is to cross-sell Web chat services to existing NewChannel customers; LivePerson's service enables online businesses' marketing, sales and customer service groups to communicate with Internet users and customers through instant messaging (IM).
"[NewChannel customers] will be able to complement their existing online initiatives in real-time, proactive sales, marketing and support capabilities," said Robert LoCascio, CEO of LivePerson, in a statement. "We will also continue to provide these clients the proactive monitoring and sales capabilities that enabled NewChannel to successfully build such a strong customer base." (For more on IM and CRM convergence this week, see Jabber, Virtual Personalities Link Up.)
According to publicly-traded LivePerson, the net cash impact of the transaction is expected to be less than $1 million. And management expects the transaction to be net cash flow positive within approximately twelve months. LivePerson customers include American Airlines Credit Union, Ameritrade, Earthlink and, more recently, eBay -- all tallied, more than 3,000 customers.
The acquisition is an aggressive, yet potentially risky move by LivePerson to create opportunities among a market littered with company failures, says Kelly Spang-Ferguson, senior analyst at market researcher Current Analysis. On the upside, LivePerson will retain NewChannel account managers, making the transition smooth. "Companies that can continue to invest in product development and customer acquisition and retention will come out on the other side of this economic downturn in a stronger competitive positioning," says Spang-Ferguson.

But the acquisition might also be perceived as a last gasp, of sorts. LivePerson's sales were down 25 percent in Q1 this year from the same quarter last year. And the company, like many others in this space, is bleeding red ink. "LivePerson's own viability will be put to the test," Spang-Ferguson says.
Tom Kaneshige also writes for Line56.com